Newbie asking- what should my first move be?

Question

Hello BP,

I have been amazed by the wealth of knowledge on the forums, the community that has reached out and the podcasts- thank you BP!

So, here's the deal: I want to get started but am not sure which option is best and would like some feedback/advice.

• I live in New York City- local prices are insane
• I have a full time job with a Global corporation and make a decent living
• I have a wife & kid- live in a rental apartment
• I have fair credit which is steadily improving
• I have 12k saved

So, my initial step could be:

• Invest in TurnKey Single family home through Memphis Invest (I like them and have spoken to their reps- but am open to other out of state investment options) - This requires 30k initial investment so, we are talking a year and a half more of saving
• 
• Get a partner to do above quicker but give up 50% of cash flow
• 
• Find a Subject Too, Lease Option or Rent to Own property in my area for myself, use the 12k for a down payment to the owner/leaser and take over ownership with a bank mortgage of my own in 12-18 months.  I am part of a credit union and know the mortgage broker there well from my BNI chapter.

Both options  take time for me to build capital and really take a long time to build equity which I need to make the 2nd deal.

Am I missing other options?

Thanks!

Ali Boone · Answer

Hey Bruce! I've done both options you mention--invest in a turnkey (but I didn't go through MemphisInvest, although I really like Chris and crew), and I've used a partner and split 50%. The latter isn't bad, especially if you aren't on the cash-giving end, because that 50% in your pocket is technically infinite returns to you! So, any cash on $0 down, that's awesome. So I wouldn't necessarily rule that one out. I'm actually refi-ing a property I bought with a partner like that right now, so not only do I get the monthly cash flow each month but now I'm about to get a huge chunk of cash-out refi from it too! All for $0 in on my part. Can't beat that.

If you do the partner route though, you just want to be sure if you are buying turnkeys that you are buying ones with big enough margins to support a 50/50 split. I'm not positive the Memphis market gets that big of margins right now, but I'd have to look at their properties.

Alex M. · Answer

Look into FHA. Both standard and FHA 203k - which provides funds for rehab. Buy a duplex. Ask for a seller assist. $12k should be enough to get you a decent duplex or triplex in some neighborhoods if you can use a seller assist to get you the rest of the closing costs. Once in it, work on your side and improve it so that it can be rented out for more when you move into the next one, but for now, use income on the other side to drop your cost of living so you can build up more savings for the next one.

Bruce Faulk · Answer

Thanks for the useful info on real estate and the BP site @Alex M.!

Mark Shaffar · Answer

@Bruce FaulkYou could just look at a cheaper buy and hold. Some banks go as low as 15% for a non owner occupied. There are plenty of rehabbed turnkey rentals for under 80k in the Midwest

Angel Rosado · Answer

@Bruce Faulk Hey welcome to BP forums.  I completely agree with you BP is an amazing place to get a lot of information.  When I first began researching I let the home prices scare me away from my local area (which is New York as well) but within a 2 hour drive you can find places that you may be able to invest in.  Just remember that 99% of "deals" arent really deals this is even with Turnkey models.

I will say that by putting it in writing you have created momentum in the world to bring you what you are looking for just make sure you continue to preserver, don't give up.

I would also highly suggest try to meet some local REI through BP meetups, meetup.com, or local chapters and this will allow you to network with individuals who can provide guidance and maybe even bring you under their wing and there is no better experience than this.

@Alex M. made a great point and this is actually the model I will be following using a FHA 203K and live in it for approximately 1-2 years.

Mark Nolan · Answer

@Bruce Faulk

Welcome to Bigger Pockets. Consider sending messages to other members which is my favorite part of the website.

Dmitriy Fomichenko · Answer

Welcome to BP community @Bruce Faulk It is a great place to meet new friends and learn about various aspects of real estate and more. Here are a few recommendations for you:

Find and connect with other BP members that are in your area: http://www.biggerpockets.com/meet

Set up keyword alerts to be notified of the topics that interest you: http://www.biggerpockets.com/alerts

Wishing you the best!

Johnny Kang · Answer

@Bruce Faulk

Hey Bruce, I'm in NYC as well. Mostly investing in Brooklyn/Queens.

I started getting in to real estate investing a little over a year ago (around March 2014), trying to find short sales. I only heard about "wholesaling" around June 2014. You don't have to start with wholesaling, but many people start off in real estate this way. I knew it was working for others, but was apprehensive about taking action myself, due to something called "FEAR."

And I had lots of it. (i.e. what if I spend money on yellow letters, which aren't exactly cheap and don't find any motivated sellers. or even if I do find motivated sellers, how would I know how much to offer so I can make a profit? And even if I did offer the right amount, how do I go about finding buyers?) The more I thought about it, the more questions it raised and my insecurities got stronger and stronger.

1) Get Basic Knowledge (at first, but continue learning). I picked out 3 podcasts to listen to about wholesaling and decided to just jump in (you can go to iTunes and do a search; Of course BP has one. Sean Terry's "Flip to Freedom" is good. and "The No Limits Real Estate Podcast".) until I felt like I got the general picture.

2) Take Massive Action. I got some data leads from List Source on Absentee Owners who had equity and ordered about 1800 letters from Yellowletter.com, which cost me about $2300, and also sent out 1400 post cards. I started getting calls 2 days after sending them out.

In total, I received about 50~60 calls. Went to see a few properties, but met 1 really motivated seller who wanted to take the proceeds from the sale and buy a better house. At this point, I still didn't really know how to run comps, or even know which websites I can go to get accurate information (I started out using Zillow.com whichI still use, but now in conjunction with Propertyshark.com), but because of my partners, we got it under contract and made $16,500.

3) Find Mentors. Luckily for me 2 of my partners are people that have been in the real estate industry for over 20 years each. I met my first partner, Ellen when I was still in finance, looking for office space for myself and she was a real estate investor. I kept in touch with her because real estate was something I was interested in, and I knew to really learn how to invest, you had to start working with someone "in the game" side-by-side on a daily basis to learn quickly. And the quickest way to learn something new is by doing it. (my other partner is a licensed commercial appraiser of 20 years, someone Ellen's known for about 15 years). There's a ton of investors in NYC looking for bird dogs who can find deals for them (just go on Craig's List and search for "bird dogs" or "finders" I believe in the job section). And whichever way you want to go in real estate (rentals, commercial, residential, land, etc) you're going to have to learn how to find deals, so working with trust worthy investors who are willing to teach you the ropes, while you help them find deals is the best way I know how.

Since doing my initial letter/postcard campaign October of 2014, we've had more deals we closed on. Total net was $16,500 (my 1st one), $23,200; $23,700, and $122,000. $185,400 total!!! and we have 3~4 deals in the pipe line which we should be going to contract next month

My main point is, you'll get the most out of your efforts by working with people who've already been investing for some time (doesn't have to be 20 years), and know their stuff where you can work in their environment that'll help you learn-by-doing, with not only specific information, but more importantly, those little nuances that you can't learn from a book, or just by meeting someone at a networking meeting (and I go to those as well).

All the best!

Johnny

Angel Rosado · Answer

Also if you hit @? it will bring up a list of all those that have posted in the post and alert them that they have a mention.

Alex M. · Answer

@Bruce Faulk - I guess it depends on where in NYC you are currently and where you are willing to be that still works for you and your family. I don't know the NYC market personally, other than to understand it is very expensive and likely difficult to find a property in Manhattan area that would work as a cash flowing investment. That said, I believe there are a number of BP folks that invest in and around NYC and have been able to find small multis. I'm sorry I cannot point you in the direction of these folks... hopefully someone with knowledge will comment here.

Also - the @ function for people's names is one of those things on BP that I wish was a little more intuitive, but just so u know - if you enter @ and the person's name a list of options will pop up at the bottom of the screen you are typing in. If you select that name from the list, it will hotlink it so it flags that person when you post.

Good luck!

Newbie asking- what should my first move be?

Most Popular Reply